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Share of Home Investors Drops For First Time in Two Years

Investor activity in the housing market dropped off during the second quarter for the first time in two years after reaching an all-time high in January. The share of single-family purchases made by investors in January was 29.8%, but by June it had declined five percentage points to 23.4%, according to a CoreLogic analysis.

Investors purchased 80,000 homes in June 2024, compared with 112,000 in June 2023 and 149,000 in June 2021, a nearly 50% decrease. Overall, the level of purchase activity through the first half of 2024 seems more comparable to pre-pandemic investment activity, CoreLogic said.

The slide in investor activity began in March, but the investor share remained above pre-pandemic levels, which consistently oscillated between 15% and 20%. CoreLogic said this decline could be a seasonal movement that comes from increased buyer activity during the summer months.

In line with historical trends, investors concentrated their activity more in the lower pricing tiers. During June, 29% of investor purchases were in the lower price tier compared with 22% in the medium-priced tier and 21% in the high-priced tier.

This could be creating competition for first-time homebuyers, who also are frequent buyers in the lower-priced tier. However, investors may be filling a gap as first-time homebuyers are opting to stay in the rental market due to decreased home affordability.

Investor activity also is concentrated in high-population markets. Dallas and Houston were the top markets for both investor and non-investor purchasing activity, according to the analysis. Atlanta placed third but had higher levels of investor purchases. Los Angeles and Riverside, California, had very low transaction volumes for their population size, but both are ranked toward the top of the list for investor purchases, said CoreLogic.

Most home investors are small investors owning less than 10 properties or medium investors owning up to 100 properties. Large and mega investors account for a very small share of total purchases, according to the report. The average small investor share is about 18% while the mega investor share is about 1%.

The smallest declines in investor activity were in the Northeast, California and Florida. Larger declines in the Mountain West and lower Midwest support the theory that the overall decline is seasonal as these areas typically have more extreme seasonal fluctuations, said the analysis.

Reprinted with permission from the Tuesday, 01 October 2024 04:43:42 EST online edition of GlobeSt © 2024 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.